If you’re an employer in Queensland, Australia, understanding payroll tax is essential to ensure compliance with state regulations. This guide will walk you through when to register, how payroll tax is calculated, and what payments are included.
When to Register for Payroll Tax
Employers in Queensland must register for payroll tax if their Australian taxable wages exceed the annual threshold of $1.3 million. This includes wages paid to employees in Queensland and other states. If you have multiple businesses, the threshold applies to the combined wages of all your entities.
You must register within seven days of the end of the month in which your wages exceed the threshold of $25,000 in a week. Note that “wages” for the purposes of payroll tax can mean more than what you process in payroll – please see the guide below on what payments are included. This can mean you are required to register for payroll tax even if your payroll figures are less than $25,000.
What Payments Are Included
Payroll tax applies to a wide range of payments made to employees, including:
- Gross salaries and wages (including leave payments).
- Bonuses and commissions.
- Allowances (although some allowances are exempt, such as c/km travel).
- Fringe benefits (excluding car parking fringe benefits).
- Payments to contractors under certain conditions.
Some payments are exempt, such as wages for apprentices and trainees, genuine redundancy payments, and certain allowances. You can find a full list at https://qro.qld.gov.au/payroll-tax/liability/wages/
Contractor Payments
The rules around which contractors to include as taxable wages are quite complex – the QRO states that contractor payments that are to be included are if:
- The contractor provides services that are integral to your business operations.
- The contractor is paid for their labor or services, rather than for the supply of goods or materials.
- The contractor does not meet any of the exemptions outlined by the Queensland Revenue Office.
There are a number of exemptions which can be applied, the main exemptions are:
- Services not ordinarily required by your business.
- Services provided for less than 90 days in a financial year.
- Services performed by 2 or more people
You can find a full list of the exemptions and how they apply at https://qro.qld.gov.au/payroll-tax/liability/contractor-payments/exemptions/
We do find this area requires a comprehensive review as it depends on the specifics of every arrangement.
How Payroll Tax is Calculated
Payroll tax is calculated based on your total Queensland taxable wages, minus any applicable deductions, multiplied by the payroll tax rate. The current rates are:
- 4.75% for employers or groups with Australian taxable wages of $6.5 million or less.
- 4.95% for employers or groups with wages exceeding $6.5 million5.
A common misconception is that once you are registered, you pay payroll tax on all your wages. You only pay payroll tax on the wages that are above the threshold of $1.3 million.
For example, if your Queensland taxable wages are $2 million, your payroll tax liability would be calculated as: $(2,000,000 – 1,300,000) times 4.75% = $33,250.
Further discounts can apply to employers in remote/regional areas.
Key Takeaways
Importantly the key points to remember are:
- Register for payroll tax if your wages exceed the threshold.
- Include all taxable wages and payments when lodging returns.
- Calculate your liability using the applicable rate and deductions.
By staying informed and compliant, you can avoid penalties and ensure smooth operations for your business. If you do have complex questions surrounding Payroll Tax there are law firms who specialise in this area and can provide comprehensive advice.
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